Political-Economy and Inflation

Paul Krugman devoted his column two weeks ago to the conduct of economic punditry as if the economy were a nineteenth century morality play: sermons about “debasing” the currency, longings for gold, fretting over inflation at the nadir of an economic crisis, a masochistic enthusiasm for “belt tightening” (“Misguided Monetary Mentalities,” The New York Times, 12 October 2009, p. A23). Taking off from this, Matthew Yglesias makes the point about the degree that class-parochial interests play in purportedly objective economic analysis (“The Monetary Hawks,” ThinkProgress, 12 October 2009):

… I would suggest that divergent analysis is in part driven by things that have relatively little to do with analysis. … if we have four or five years of near-zero inflation and 9-10 percent unemployment that will be fine for prosperous middle aged people and devastating to the interests of the poor and the young. Conversely, if we have four or five years of modest unemployment with four or five percent inflation, that will be fine for young people and poor people but potentially detrimental to the interests of wealthy people sitting on large piles of savings. Ultimately, I don’t think it helps the progressive cause to ignore the class / ideological elements to this dispute and just pretend to be engaging in a neutral technocratic dispute about the correct application of the Taylor Rule. What we’re talking about, after all, is decision-making under conditions of moderate uncertainty. What the hawks are proposing to do is to implement a policy that’s extremely attentive to minimizing downside risk to the currently wealthy whereas Krugman is proposing a policy that’s [attentive] to minimizing downside risk for people with below-average labor market prospects.

The problem is that we’ve adopted a manner of speaking about economic issues denuded of any mention of interest. The language of popular economics today is categorical: a strong dollar is good, a week dollar is bad; stable prices are good, inflation is bad; low unemployment is good, high unemployment is bad; rising house prices are good, stagnating or falling house prices are bad; et cetera. But none of these factors are categorically good or bad (few things in life are). What is omitted is the “for whom” of these characterizations of good and bad. Low employment may be good for job seekers, but high unemployment is good for employers: they have their pick of workers when hiring and they hold the majority of the bargaining power in wage negotiations. A strong dollar may be good for Wal Mart and their customers, but it’s bad for General Motors and their employees.

Real estate maintains some knowledge of contraposition with their talk of a buyers’ market versus a sellers’ market. We do not speak with a similar respect to the value of the dollar: of an investors’ dollar (strong) versus a producers’ dollar (weak) or an importers’ dollar (strong) versus an exporters’ dollar (weak). Or in employment, some people might think getting a raise or ease in finding a job are good, but these are what someone else might call labor price inflation (bad).

Economics isn’t free of the language of interest per se, so much as of one particular set of interests. The propaganda victory of the economic interests of Wall Street, the investing class, large business is so complete that their economic preferences have become de facto the whole language of economics. The awareness of the interests of all other economic actors has been totally expunged from the language of economics — well, not totally: there is the disciplinary ghetto referred to as heterodox economics, an exception that proves the rule.

To have asserted control over the linguistic territory is to have banished the political dispute; to have disappeared from the lexicon is to have ceded political legitimacy. Disputes over the political mixture of the interests of one economic class versus those of another are no longer about one set of economic relations versus another, but now take place in the frame of a rational economic order versus chaos, unreason and decline.

A firm separation between economics in its positivist, scientific role and economics in its normative, polemical and political role should be vigorously policed. Or perhaps economics is simply to value-laden, too embedded in the hurly-burley of human affairs for such a division to be tenable. Perhaps we should dispense with the notion of economics as a hard science in favor of a thoroughgoing political-economy. Even if we admit the possibility of a purely positivist economics, all that economics can do in our political deliberations is serve as a speculative tallyman of the opportunity costs of various policy options. The primacy of politics should come to the fore whenever economics crosses over from the academy to the public realm.

Target values for economic factors represent a political compromise between contending societal factions. The most well known of these is the NAIRU, the trade-off between inflation and unemployment codified in the statutory guidance of most of the world’s central banks. But inflation isn’t an unqualified evil. Its primary evils are that it has a tendency to run-away and, related, that it breeds uncertainty (a certain anticipatable regularity to the future is necessary to the function of capitalism). It used to be well known amidst the working (and indebted) classes that a certain amount of inflation served their interest and that “sound money” was merely the rallying cry of the investor class. The class conflict of easy versus sound money used to be a significant fault line separating progressive from conservative, populist from whig. Hence the advocacy of arch-populist William Jennings Bryan of an inflationary policy of bimetallism or “free silver” in the election of 1896.

There’s talk today about how vile it would be for the government to attempt to inflate away its debt (“debasing the currency” they call it), but the government doesn’t only inflate away its debt, it inflates away all dollar-denominated debts. A couple of years of higher than target inflation might be good for a country that has seen twenty years of galloping gains for the investor class, but racked up unsustainable amounts of debt among the middle and working classes. The investing class would scream bloody murder, but not because 3-5% inflation would be the end of economic reality as we know it, but because it would be a wealth transfer from creditor to debtor.

When Realpolitik and Principle Converge

Apropos my two previous posts about keeping non-proliferation goals in the mix with democracy permotion, Matthew Yglesias spells out the logic for why this is probably not tenable (“Engagement With a Post-Crackdown Iran,” Think Progress, 23 June 2009):

The hope behind an engagement strategy was that the Supreme Leader might be inclined to side with the more pragmatic actors inside the system — guys like former president Rafsanjani and former prime minister Mousavi. With those people, and most of the Iranian elites of their ilk, now in open opposition to the regime, any crackdown would almost by definition entail the sidelining of the people who might be interested in a deal. Iran would essentially be in the hands of the most hardline figures, people who just don’t seem interested in improving relations with other countries. Under the circumstances, the whole subject of American engagement may well wind up being moot.

So maybe the realpolitik and the principled position have converged here. All-in with the dissidents may be the only option that can produce progress on the nuclear issue at this point.

Petrified Onions

The latest controversy to sweep the blogosphere is the outing of previously pseudonymous blogger John Blevins, a.k.a. Publius by Ed Whelan (Whelan, Ed, “Exposing an Irresponsible Anonymous Blogger,” The Corner, National Review Online, 6 June 2009; Blevins, John, “Stay Classy Ed Whelan,” Obsidian Wings, 6 June 2009; Whelan eventually apologized, “My Apologies to Publius,” The Corner, 8 June 2009). This prompts some musings on the subject of on-line personae by Matthew Yglesias (“The Metaphysics of Pseudonymity,” Think Progress, 9 June 2009):

And of course it’s a fallacy to assume a perfect identity between any Internet persona and its author(s). A whole bunch of different writers collaborate on producing Think Progress and they write in what I think is a pretty uniform voice. But like the writers behind The Economist, they’re actually all beautiful unique snowflakes who are often quite different from the TP persona. And by the same token, Matthew Yglesias “in real life” is not the same as the character I play on the Internet. On the other hand, I’m not sure it’s quite right to say that the in-the-flesh [ME] is “real” and the on-the-Internet one is somehow “fake.” This blog has existed for over seven years now, and it’s almost certainly the case that more people “know” the persona than know me. And I think that should hold all the more strongly for any prominent pseudonymous bloggers. The well-known, stable character is a person with integrity, influence, a personality, a reputation, social connections, etc., the same as anyone else. To be sure, they may be artifice in terms of the presentation of the character. But our various “in real life” self-presentations (to a boss, to a first date, to family, to friends, to people we run into at a high school reunion) involve artifice as well.

In the past you body was at least the skeleton on which your personae hung. They depended on you to take them places, to animate them. The dutiful son only existed at the family get-together, after which he was de-emanated. The nightclub alter ego only came out to play when the costume was dawned.

Media personae persist. In the era of mass participation mass media, your personae don’t need you anymore. They’re out there, being recreated by anonymous onlookers while you are sleeping.

The Hegemony of Neoliberalism

A roundup of some recent thinking on the hegemony of neoliberalism:

  1. Taking off from what Matthew Yglesias calls “Prestige Cross-Pollination1 and Ezra Klein “The Tyranny of the Economists,”2 Mike Konczal at RortyBomb relates of the,

    … “credibility gap” between sociologists and economists, even when they deploy the same methods, when it comes to the public debate over the issues we face.3

    It helps to have a paradigm, and in recent years economics has rather forcefully acquired one.4

  2. In his review of Steven Teles’s new book, The Rise of the Conservative Legal Movement,5 Henry Farrell makes a brief assessment of the state of the tyranny of the bureaucracy:

    If you win the technocrats (and [the law and economics movement] arguably has won the technocrats), then you very nearly have won the entire game.6

    This strikes me as about true. The shift rightward of the economics and policy intelligentsia since the New Frontier / Great Society heyday of Keynesian fine tuning has played a significant part in the general right-ward drift of the polity. There aren’t exactly dais upon dais of unreconstructed Keynesians offering policy makers intellectual cover on the Sunday morning shows.

  3. Via Charles Mudede7, Steven Shaviro reacts to Peter Ward’s new book, The Medea Hypothesis: Is Life on Earth Ultimately Self-Destructive?8 Using the purported instability of ecological systems — one of the paradigm cases of self-organization — Mr. Shaviro sets himself against emergence, evolution, complexity, network theory, et al. He identifies Friedrich Hayek as one of the key thinkers of self-organization — the market would be one of the other paradigm cases —

    But the most significant and influential thinker of self-organisation in the past century was undoubtedly Friedrich Hayek, the intellectual progenitor of neoliberalism. … inspired by both cybernetics and biology, Hayek claimed that the “free market” was an ideal mechanism for coordinating all the disparate bits of knowledge that existed dispersed throughout society, and negotiating it towards an optimal outcome. Self-organization, operating impersonally and beyond the ken of any particular human agent, could accomplish what no degree of planning or willful human rationality ever could.9

    Friedrich Hayek, cyberneticist.

Combine these three and where are we for policy making and policy debate?

  1. Yglesias, Matthew, “Prestige Cross-PollinationThink Progress, 2 June 2009
  2. Klein, Ezra, “The Tyranny of the Economists,” The Washington Post, 2 June 2009
  3. Konczal, Mike, “Economists, Methods and Government,” RortyBomb, 3 June 2009
  4. The Future of Economics is Here: The Arational and the Irrational,” This is Not a Dinner Party, 28 September 2008
  5. Teles, Steven, The Rise of the Conservative Legal Movement: The Battle for Control of the Law (Princeton, NJ: Princeton University Press, 2008)
  6. Farrell, Henry, “Fabians and Gramscians in Law and Economics,” Crooked Timber, 30 April 2009
  7. Mudede, Charles, “Self-Made,” SLOG, The Stranger, 28 May 2009
  8. The Medea Hypothesis: Is Life on Earth Ultimately Self-Destructive? (Princeton, NJ: Princeton University Press, 2009)
  9. Shaviro, Steven, “Against Self-Organization,” The Pinocchio Theory, 26 May 2009

New York Bagels

I see that over the weekend there was much consideration of the issue of New York and Bagels. Matthew Yglesias comments (“The Stuff that Matters,” ThinkProgress, 28 November 2008):

I’ve now lived in DC long enough that I forget how much I like real bagels. But then I come back to New York for Thanksgiving and the whole sad little fantasy universe I’ve constructed for myself in which DC’s bad bagels aren’t a big deal collapses.

Kevin Drum does a little wondering as well (“Bagels!,” MoJo, 28 November 2008)

It’s hard for me to remain on topic here because Washington, D.C. is such a miserable hole of a city. It would be hard to come up with a single factor in which New York was not vastly better of a city. The only reason that anyone tolerates D.C. is that it’s the political and intellectual capitol of the country.

That said, whenever I go to New York I have a list of things that I want to do and every time it includes bagels. This visit included bagels on two out of three mornings. My friend has been living three blocks from Tal Bagels so it has been pretty convenient, but on other visits I have commuted for bagels.

I’ve heard a number of the theories (the municipal water), but I’d have to say that I think it’s a gestalt. The bagels themselves are better: crunchier on the outside, chewier on the inside. But the schemers are better too (we brought back a tub of the olive cream cheese and another of the tofu, which rather than being some vegan concession has a flavor zestier and brighter than the cream cheeses). And most important is the ambiance. Woody places with a bunch of working-class artisans in black pants, white t-shirts, white aprons, and white paper hats, with a lot of hurry and attitude is different than the hired gun Ethiopians at Au-bon-Pan. A bagel shop is a stylized thing in New York. The cream cheeses are arrayed in gigantic bowls under glass, along with a host of other Jewish foods: smoked fish, knishs, couscous salads.

My favorite bagel places in New York are Ess-a-bagle (359 1st Avenue, Manhattan, New York 10010, official site here) and Tal Bagels (977 1st Avenue, Manhattan, New York 10022), both very Jewish, and The Bagel Store (247 Bedford Ave, Brooklyn, NY 11211), a Williamsburg hipster joint, but still unbelievably good.

The Democrats Reborn?

I’m trying to keep up my jaundiced eye here, but I feel like tonight I have seen a Democratic party unlike any I have seen before in my lifetime. Walter Mondale was perhaps the last of the old guard still to possess some fight, but after that, not Dukakis, or Clinton, or Al Gore or John Kerry. They all seemed too timid, too poll tested, too cowed. First last night in Joe Biden’s speech and then again tonight in Barack Obama’s I heard a Democratic party unbowed, spirited, confident.

Senator Biden’s introduction by his son and his own discussion of his family was surprisingly emotional and seemingly so for everyone involved. His speech was the version of values that Democrats should be putting forward, it was tough on foreign policy, and unlike Democrats for the last eight years, effortlessly sincere, uncontrived. As Matthew Yglesias pointed out (“It’s Biden,” ThinkProgress, 23 August 2008), the selection of Biden for VP “signals as desire to take the argument to John McCain on national security policy” and deliver to voters “a full-spectrum debate about the issues facing the country rather than a positional battle in which one party talks about the economy and the other talks about national security.” In Joseph Biden I think I first, finally saw a different, rejuvenated Democrats.

The same was true for Barack Obama’s speech tonight. His cadence was off in places, but it was defiant, pugilistic and signaled to me that the Senator has absorbed all the right lessons about the campaign. I think many of the myths that have plagued the Senator as well as the party at large for the last few weeks have been definitively left behind after tonight. It showed some of the populism that worked so well for Al Gore in the final weeks of the 2000 election. My favorite part, like with Senator Biden, was when Senator Obama took the foreign policy issue by the horns:

You don’t defeat — you don’t defeat a terrorist network that operates in 80 countries by occupying Iraq. You don’t protect Israel and deter Iran just by talking tough in Washington. You can’t truly stand up for Georgia when you’ve strained our oldest alliances.

If John McCain wants to follow George Bush with more tough talk and bad strategy, that is his choice, but that is not the change that America needs.

If Chris Matthews waxing rapturous is any indication, then he achieved everything he needed to do. After Chris Matthews, what more can you ask for? Who knows, maybe even Maureen Dowd will write a positive review. I think McCain’s speech a week from now will look pretty wooden in comparison.

My only concern is as, I think it was Patrick Buchanan said last night, after a week of the Republicans ripping into Senator Obama next week, the Democrats may regret going so easy on Senator McCain. Alternately, Democrats may finally have learned that you have to run your negative stuff stealth.

The Most Terrible Power of All Concentrated in One Man

In response to a reader question, Matthew Yglesias says that if President Bush so decides, there is nothing anyone can do to prevent air strikes against Iran (“By Request: What if Bush Bombs Iran?,” TheAtlantic.com, 1 July 2008):

… if Bush orders air strikes against Iranian targets, nobody can stop him. A plain reading of the text of the U.S. Constitution would seem to suggest that it would be unconstitutional for the military to follow any such order absent a declaration of war or some other form of congressional authorization. But the settled precedent, ratified by key Democratic Party leaders as recently as the bombing of Serbia during the Kosovo crisis, is that no such authorization is necessary. I’m not happy with this situation and think it’s crazy that we as a country have moved away from the constitutional procedure, but the cat’s been out of the bag for a while now and if Bush wants to bomb Iran Bush will bomb Iran.

Democracy is based in part on a notion of the wisdom of crowds — or in the negative formulation, it is based on the recognition of the perfidy of powerful men. It is terrifying to think that when it comes to the most fateful questions facing a nation — the most terrible expenditure of the nations resources a country might undertake, one that throws the very survival of the country into the pot, one capable of completely remaking the social order of a people — we have abdicated that power to a single man.

On the right there is this constant carping about the founders’ intent, originalism, strict constitutionalists and activist judges, but when it comes to this issue, perhaps the most gross violation of the founders’ intent and the plain language of the Constitution, Republicans are complete subscribers to the cult of the great leader — at least until that power passes to a Democratic president, that is.

This is one of the reasons that I like The American Conservative. They actually see this situation for the massive threat to American liberties and the American way of life that it is.

Some future president, less ambitious, more moderating, ought return to the traditional confines of the office and forfeit this unofficial power. And a Congress more attune to it’s Constitutional duty than to it’s party platform ought to reassert this prerogative by threatening impeachment to any president who dares usurp it.